Oct 07, 2013 10:57 PM IST | Source: CNBC-TV18

Internet penetration to boost ecommerce businesses: Experts

Sandip Malhotra, CEO, Homeshop 18, says 8-10 years on, internet could be faster growing than television but mobile too could surprise. VSS Mani, Founder & CEO, Just Dial says internet penetration particularly through mobile phones will be of a huge advantage.

Commenting on the ecommerce theme, VSS Mani, Founder & CEO, Just Dial says internet penetration particularly through mobile phones will be of a huge advantage for their them since their business basically thrives on 24x7 access to internet.

Whereas on the other hand for Sandip Malhotra, CEO, Homeshop18, says their 24-hour home shopping business via television is growing faster compared to internet and mobile. However, eight-10 years down the line, internet could overtake television, with mobile remaining the dark horse, he adds.

Also read: Retail plans with Bharti not tenable: Wal-Mart India

Also, since internet is now available reasonably cheap and smart phones also have become cheaper, Mani expects current growth trend for them to continue going forward. They would also continue to spend on marketing and advertising services to rollout their new products, he adds.

Malhotra believes India being a cash economy and along with low credit card penetration, cash on delivery model is here to stay.

Below is the verbatim transcript of their interview on CNBC-TV18

Q: The markets have given such a huge thumps up to Just Dial, what is the kind of sales growth and if you can extent beyond, exponentially draw up for us how revenues look like growing not just for this year but for FY15 as well?

Mani: I don't want to comment on the market cap and the price of the stock because it is so surreal and two, we have a policy of not giving guidance.

However, I can only say that the trend you are seeing this year looks very much like this trend would continue for years to come because as far as our business is concerned, I don't think we have even scratched our surface. The market is so huge and there are so many new opportunities, so we are very excited about that.

Q: One of the things that we have seen with your numbers is that people using mobile phones to log on to your site, that has been rising. How material do you think that is? For a market like India is that really the next leg of growth? Just looking at three-five years how dominant do you think that is going to be as far as your own profile is concerned?

Mani: If you look at India, we have always faced challenges when it comes to infrastructure especially hard infrastructure. So what happens with mobile phone is you do not require that much hard infrastructure; particularly if you have internet available at a reasonably cheap price and with availability of cheap smart phone which have the ability to give you the wow experience which only probably the first generation iPhone had. Since the last mile connectivity now being there, which was a challenge earlier, companies like ours tremendously benefit.

Our business thrives on 24X7 access to internet. If you go and see the mobile version of our site or web version, you could see so many things like you can see a shop, you can see the products, see videos, and also transact now.

Therefore, we feel that with this growth of internet penetration although through mobile phones, it is going to be a huge advantage for us.

Q: Will your margins keep improving because just as you gain from ads you may have to spend on advertisements?

Mani: For products that we have envisioned and for products that we are rolling out definitely need some kind of evangelist activity and promotion, so we would continue to spend money on that.  Margins would also continue to improve as we go forward year on year because basic access to our service is getting more online and it does not cost much to service an extra online customer.

Q: You have more Television (TV) shopping and internet shopping, which one is more and where are the margins more?

Malhotra: We actually have a pretty hybrid model so we are not really e-commerce, we are virtual retail. There are three screens that we operate on which is the television, the internet and the mobile - all three serve a completely different purpose because for a consumer when he is at home it is television, when he is on the go it is mobile and at work, it is the internet. All three of them are growing very rapidly.

Currently our 24 hour home shopping business which is through television is the fastest growing purely because of the acceptance and penetration. And it is the only virtual means where you can actually demonstrate a product and get consumer confidence in at the quickest.

Quarter on quarter, I think the internet and television are both growing at somewhere between 25-35 percent.

Q: Eight years-on which business do you think is going to be the largest for you? And second is in context of the payment system, payment on delivery. Do you see that as the payment system going forward, is that a hindrance or is that something that is going to sustain? From a cost perspective does that make any kind of difference?

Malhotra: Eight-ten years down the road, I think both will keep growing primarily because the penetration of both TV and the internet has huge headroom. There would be two different kinds of customers coming on-board, television will and is getting a slightly older audience whereas the internet would get a slightly younger audience.

The pace of penetration on internet is much faster than the penetration of television. Hence somewhere down the road internet would be the faster growing of the two. But you never know, mobile could surprise us completely. With the amount of surge that is happening on the mobile right now it is just a matter of time that everyone who is searching on the mobile will move to a transaction mode very soon.

There is huge headroom in all three formats of transacting, but there may be different kind of customer who comes on each of these formats and that is the important part.

On the payment mechanism, the number one priority for all of us whether we sell through television, internet or mobile is to build consumer confidence. You must remember that in the US it took five decades to move from a mom-and-pop store to e-commerce. What happened in the US in five decades is actually happening in India in two years. So, it is a fairly new phenomena.

Cash on delivery (COD) is something that we brought in purely from a consumer confidence and convenience. It is something which is here to stay. It is more expensive, it is not an easy one but we cannot wish it away. Credit card penetration is pretty low. But since we are a cash economy, so there is no way cash on delivery is going to disappear.

Disclosure: Homeshop18 and Moneycontrol are both part of Network18 Group.

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